• First Western Reports Fourth Quarter 2023 Financial Results

    المصدر: Nasdaq GlobeNewswire / 25 يناير 2024 17:21:25   America/New_York

    Fourth Quarter 2023 Summary

    • Total deposits increased to $2.53 billion, or 4.5%, from $2.42 billion as of Q3 2023
    • Loan to deposit ratio improved to 100.7% in Q4 2023, compared to 105.1% in Q3 2023
    • Net income available to common shareholders of $0.3 million in Q4 2023, compared to $3.1 million in Q3 2023 and pre-tax, pre-provision net income(1) of $4.1 million in Q4 2023, compared to $4.6 million in Q3 2023
    • Diluted EPS of $0.03 in Q4 2023, compared to $0.32 in Q3 2023
    • Total capital to risk-weighted assets ratio of 12.82% in Q4 2023, compared to 12.45% in Q3 2023

    DENVER, Jan. 25, 2024 (GLOBE NEWSWIRE) -- First Western Financial, Inc. (“First Western” or the “Company”) (NASDAQ: MYFW), today reported financial results for the fourth quarter ended December 31, 2023.

    Net income available to common shareholders was $0.3 million, or $0.03 per diluted share, for the fourth quarter of 2023. This compares to $3.1 million, or $0.32 per diluted share, for the third quarter of 2023, and $5.5 million, or $0.56 per diluted share, for the fourth quarter of 2022.

    Scott C. Wylie, CEO of First Western, commented, "While an increase in our estimated provision for credit losses reduced our profitability in the fourth quarter, we continued to execute on our strategic priorities including maintaining disciplined expense control while adding new deposit relationships. Our deposit focus resulted in 18% annualized growth in total deposits during the quarter and further reduced our loan-to-deposit ratio to be in-line with our year-end goal of 100%, while our new loan production focused on clients that also bring deposits to the bank.

    "We believe we are positioned to perform well in any economic scenario that emerges in 2024, with our strong balance sheet and conservative underwriting criteria enabling us to effectively manage through an economic downturn, while our business development capabilities and unique value proposition will enable us to take advantage of strengthening economic conditions and an increase in loan demand. While economic conditions remain uncertain, we will continue to prioritize prudent risk management and be conservative in new loan production while focusing on core deposit gathering, which should result in a modest level of asset growth until economic conditions improve. With our disciplined expense management, the continued leverage we expect to realize from past investments in technology, banking talent, and office expansion, as well as a liability-sensitive balance sheet that should lead to net interest margin expansion as interest rates decline, we believe we can deliver solid earnings growth in 2024 even with a modest level of balance sheet growth. Over the long-term, we continue to believe that we are well positioned to capitalize on our attractive markets to consistently add new clients, generate profitable growth, and further enhance the value of our franchise," said Mr. Wylie.

     For the Three Months Ended
     December 31, September 30,  December 31,
    (Dollars in thousands, except per share data) 2023   2023   2022 
    Earnings Summary     
    Net interest income$16,331  $16,766  $21,988 
    Provision for credit losses(1) 3,942   329   1,197 
    Total non-interest income 6,081   6,099   6,415 
    Total non-interest expense 18,276   18,314   19,905 
    Income before income taxes 194   4,222   7,301 
    Income tax (benefit)/expense (61)  1,104   1,830 
    Net income available to common shareholders 255   3,118   5,471 
    Adjusted net income available to common shareholders(2) 282   3,140   5,617 
    Basic earnings per common share 0.03   0.33   0.58 
    Adjusted basic earnings per common share(2) 0.03   0.33   0.59 
    Diluted earnings per common share 0.03   0.32   0.56 
    Adjusted diluted earnings per common share(2) 0.03   0.32   0.58 
          
    Return on average assets (annualized) 0.04%  0.44%  0.79%
    Adjusted return on average assets (annualized)(2) 0.04   0.45   0.82 
    Return on average shareholders' equity (annualized) 0.41   5.08   9.17 
    Adjusted return on average shareholders' equity (annualized)(2) 0.45   5.12   9.41 
    Return on tangible common equity (annualized)(2) 0.48   5.82   10.48 
    Adjusted return on tangible common equity (annualized)(2) 0.53   5.86   10.76 
    Net interest margin 2.37   2.46   3.30 
    Efficiency ratio(2) 80.77   78.76   67.66 

    ____________________
    (1) Provision for credit loss amounts for periods prior to the ASC 326 adoption date of January 1, 2023 are reported in accordance with previously applicable GAAP.
    (2) Represents a Non-GAAP financial measure. See “Reconciliations of Non-GAAP Measures” for a reconciliation of our Non-GAAP measures to the most directly comparable GAAP financial measure.


    Operating Results for the Fourth Quarter 2023

    Revenue

    Total income before non-interest expense was $18.5 million for the fourth quarter of 2023, a decrease of 18.0%, compared to $22.5 million for the third quarter of 2023. Gross revenue(1) was $22.5 million for the fourth quarter of 2023, a decrease of 2.7%, from $23.1 million for the third quarter of 2023. The decrease was primarily driven by a decrease in Net interest income as a result of higher interest expense primarily due to higher deposit costs, offset partially by higher interest income. Relative to the fourth quarter of 2022, Total income before non-interest expense decreased 32.1% from $27.2 million. Relative to the fourth quarter of 2022, Gross revenue decreased 22.4% from $29.0 million. The decrease was driven by a decrease in Net interest income as a result of higher Interest expense due to higher deposit costs, offset partially by higher Interest income.

    (1) Represents a Non-GAAP financial measure. See “Reconciliations of Non-GAAP Measures” for a reconciliation of our Non-GAAP measures to the most directly comparable GAAP financial measure.


    Net Interest Income

    Net interest income for the fourth quarter of 2023 was $16.3 million, a decrease of 2.6% from $16.8 million in the third quarter of 2023. Relative to the fourth quarter of 2022, Net interest income decreased 25.7% from $22.0 million. The decreases were due to higher Interest expense driven primarily by higher deposit costs, offset partially by higher Interest income.

    Net Interest Margin

    Net interest margin for the fourth quarter of 2023 decreased 9 basis points to 2.37% from 2.46% reported in the third quarter of 2023, primarily due to growth in interest-bearing deposits during the quarter and continued pricing pressure due to a highly competitive deposit market.

    The yield on interest-earning assets increased 16 basis points to 5.51% in the fourth quarter of 2023 from 5.35% in the third quarter of 2023 and the cost of interest-bearing deposits increased 19 basis points to 3.94% in the fourth quarter of 2023 from 3.75% in the third quarter of 2023.

    Relative to the fourth quarter of 2022, net interest margin decreased from 3.30%, primarily due to a 172 basis point increase in average cost of deposits, offset partially by a 59 basis point increase in loan yields.

    Non-interest Income

    Non-interest income for the fourth quarter of 2023 remained flat at $6.1 million, compared to the third quarter of 2023, primarily driven by a decrease in Net gain on mortgage loans and lower Trust and advisory fees during the fourth quarter of 2023, partially offset by higher Insurance fees.

    Relative to the fourth quarter of 2022, Non-interest income decreased 5.2% from $6.4 million. The decrease was primarily due to a decrease in Bank fees, Insurance fees, and Net gain on mortgage loans, partially offset by increases in Trust and investment management fees and lower Unrealized losses on loans accounted for under the fair value option.

    Non-interest Expense

    Non-interest expense for the fourth quarter of 2023 remained flat at $18.3 million compared to the third quarter of 2023. Relative to the fourth quarter of 2022, Non-interest expense decreased 8.2% from $19.9 million, driven primarily by lower Salaries and employee benefits related to staffing reductions to better align with lower revenue.

    The Company’s efficiency ratio(1) was 80.8% in the fourth quarter of 2023, compared with 78.8% in the third quarter of 2023 and 67.7% in the fourth quarter of 2022.

    (1) Represents a Non-GAAP financial measure. See “Reconciliations of Non-GAAP Measures” for a reconciliation of our Non-GAAP measures to the most directly comparable GAAP financial measure.

    Income Taxes

    The Company recorded Income tax benefit of $0.1 million for the fourth quarter of 2023, compared to Income tax expense of $1.1 million for the third quarter of 2023 and Income tax expense of $1.8 million for the fourth quarter of 2022. The tax benefit in the fourth quarter of 2023 was primarily due to the impact of 2022 state return to provision items.

    Loans

    Total loans held for investment were $2.55 billion as of December 31, 2023, an increase of 0.5% from $2.54 billion as of September 30, 2023, due to loan growth in residential mortgage and CRE portfolios, partially offset by small declines in other portfolios. Relative to the fourth quarter of 2022, Total loans held for investment increased 2.9% from $2.48 billion as of December 31, 2022, attributable to loan growth primarily in our residential mortgage portfolios.

    Deposits

    Total deposits were $2.53 billion as of December 31, 2023, an increase of 4.5% from $2.42 billion as of September 30, 2023, as a result of new and expanded deposit relationships. Relative to the fourth quarter of 2022, Total deposits increased 5.1% from $2.41 billion as of December 31, 2022, driven primarily by new and expanded deposit relationships.

    Borrowings

    Federal Home Loan Bank (“FHLB”) and Federal Reserve borrowings were $125.7 million as of December 31, 2023, a decrease of $134.2 million from $259.9 million as of September 30, 2023. Relative to the fourth quarter of 2022, borrowings decreased $21.2 million from $146.9 million as of December 31, 2022. The change in borrowings from September 30, 2023 and December 31, 2022 is driven by a decline in FHLB borrowing reliance as a result of increased deposits.

    Subordinated notes remained flat at $52.3 million as of December 31, 2023, compared to September 30, 2023. Subordinated notes increased $0.2 million from $52.1 million as of December 31, 2022.

    Assets Under Management

    Assets Under Management ("AUM") increased by $357.2 million during the fourth quarter to $6.75 billion as of December 31, 2023, compared to $6.40 billion as of September 30, 2023. This increase was primarily attributable to an increase in market values throughout the fourth quarter of 2023, resulting in an increase in the value of AUM balances. Total AUM increased by $646.0 million compared to December 31, 2022 from $6.11 billion, which was primarily attributable to improving market conditions year-over-year resulting in an increase in the value of AUM.

    Credit Quality

    Non-performing assets totaled $59.7 million, or 2.00% of total assets, as of December 31, 2023, compared to $56.1 million, or 1.87% of total assets, as of September 30, 2023. The increase was primarily attributable to two loans within the Construction and Development and Commercial and Industrial classifications moving to non-accrual during the fourth quarter of 2023, totaling $3.9 million. As of December 31, 2022, non-performing assets totaled $12.3 million, or 0.43% of total assets. Relative to the fourth quarter of 2022, the increase in non-performing assets was driven primarily by the addition of $42.2 million in loans during the third quarter of 2023.

    During the fourth quarter of 2023 the Company recorded a provision expense of $3.9 million, compared to a provision expense of $0.3 million in the third quarter of 2023 and a $1.2 million provision expense in the fourth quarter of 2022. The provision expense recorded in the fourth quarter of 2023 reflects an increase in allowance on pooled loans driven primarily by loan growth, as well as an allowance established on individually analyzed loans that were downgraded to non-performing in a prior quarter and two loans downgraded to non-performing in the fourth quarter of 2023, partially offset by a provision release related to a net decrease in off-balance sheet commitments.

    Capital

    As of December 31, 2023, First Western (“Consolidated”) and First Western Trust Bank (“Bank”) exceeded the minimum capital levels required by their respective regulators. As of December 31, 2023, the Bank was classified as “well capitalized,” as summarized in the following table:

     December 31,
     2023
    Consolidated Capital 
    Tier 1 capital to risk-weighted assets9.48%
    Common Equity Tier 1 ("CET1") to risk-weighted assets9.48 
    Total capital to risk-weighted assets12.82 
    Tier 1 capital to average assets7.89 
      
    Bank Capital 
    Tier 1 capital to risk-weighted assets10.62 
    CET1 to risk-weighted assets10.62 
    Total capital to risk-weighted assets11.69 
    Tier 1 capital to average assets8.83 


    Book value per common share decreased 0.2% from $25.76 as of September 30, 2023 to $25.70 as of December 31, 2023. The fourth quarter of 2023 included a decrease of $0.6 million in accumulated other comprehensive income due to the effect of our cash flow hedge of certain FHLB borrowings. Book value per common share increased 1.3% from $25.37 as of December 31, 2022. The adoption of CECL on January 1, 2023 resulted in a $0.56 reduction of book value per common share.

    Tangible book value per common share(1) decreased 0.2% from $22.42 as of September 30, 2023, to $22.37 as of December 31, 2023. Tangible book value per common share increased 1.7% from $21.99 as of December 31, 2022. The adoption of CECL on January 1, 2023 resulted in a $0.56 reduction of tangible book value per common share.

    (1) Represents a Non-GAAP financial measure. See “Reconciliations of Non-GAAP Measures” for a reconciliation of our Non-GAAP measures to the most directly comparable GAAP financial measure.


    Conference Call, Webcast and Slide Presentation

    The Company will host a conference call and webcast at 10:00 a.m. MT/ 12:00 p.m. ET on Friday, January 26, 2024. Telephone access: https://register.vevent.com/register/BI06726eadbe6744a39e0d0f89507793ba

    A slide presentation relating to the fourth quarter 2023 results will be accessible prior to the scheduled conference call. The slide presentation and webcast of the conference call can be accessed on the Events and Presentations page of the Company’s investor relations website at https://myfw.gcs-web.com.

    About First Western

    First Western is a financial services holding company headquartered in Denver, Colorado, with operations in Colorado, Arizona, Wyoming, California, and Montana. First Western and its subsidiaries provide a fully integrated suite of wealth management services on a private trust bank platform, which includes a comprehensive selection of deposit, loan, trust, wealth planning and investment management products and services. First Western’s common stock is traded on the Nasdaq Global Select Market under the symbol “MYFW.” For more information, please visit www.myfw.com.

    Non-GAAP Financial Measures

    Some of the financial measures included in this press release are not measures of financial performance recognized in accordance with generally accepted accounting principles in the United States (“GAAP”). These non-GAAP financial measures include “Tangible Common Equity,” “Tangible Common Book Value per Share,” “Return on Tangible Common Equity,” “Efficiency Ratio,” “Gross Revenue,” “Allowance for Credit Losses to Adjusted Loans,” “Adjusted Net Income Available to Common Shareholders,” “Adjusted Basic Earnings Per Share,” “Adjusted Diluted Earnings Per Share,” “Adjusted Return on Average Assets,” “Adjusted Return on Average Shareholders’ Equity,” and “Adjusted Return on Tangible Common Equity”. The Company believes these non-GAAP financial measures provide both management and investors a more complete understanding of the Company’s financial position and performance. These non-GAAP financial measures are supplemental and are not a substitute for any analysis based on GAAP financial measures. Not all companies use the same calculation of these measures; therefore, this presentation may not be comparable to other similarly titled measures as presented by other companies. Reconciliation of non-GAAP financial measures, to GAAP financial measures are provided at the end of this press release.

    Forward-Looking Statements

    Statements in this news release regarding our expectations and beliefs about our future financial performance and financial condition, as well as trends in our business and markets are “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements often include words such as “believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate,” “project,” “position,” “outlook,” or words of similar meaning, or future or conditional verbs such as “will,” “would,” “should,” “opportunity,” “could,” or “may.” The forward-looking statements in this news release are based on current information and on assumptions that we make about future events and circumstances that are subject to a number of risks and uncertainties that are often difficult to predict and beyond our control. As a result of those risks and uncertainties, our actual financial results in the future could differ, possibly materially, from those expressed in or implied by the forward-looking statements contained in this news release and could cause us to make changes to our future plans. Those risks and uncertainties include, without limitation, the lack of soundness of other financial institutions or financial market utilities may adversely affect the Company; the Company’s ability to engage in routine funding and other transactions could be adversely affected by the actions and commercial soundness of other financial institutions; financial institutions are interrelated because of trading, clearing, counterparty or other relationships; defaults by, or even rumors or questions about, one or more financial institutions or financial market utilities, or the financial services industry generally, may lead to market-wide liquidity problems and losses of client, creditor and counterparty confidence and could lead to losses or defaults by other financial institutions, or the Company; integration risks and projected cost savings in connection with acquisitions; the risk of geographic concentration in Colorado, Arizona, Wyoming, California, and Montana; the risk of changes in the economy affecting real estate values and liquidity; the risk in our ability to continue to originate residential real estate loans and sell such loans; risks specific to commercial loans and borrowers; the risk of claims and litigation pertaining to our fiduciary responsibilities; the risk of competition for investment managers and professionals; the risk of fluctuation in the value of our investment securities; the risk of changes in interest rates; and the risk of the adequacy of our allowance for credit losses and the risk in our ability to maintain a strong core deposit base or other low-cost funding sources. Additional information regarding these and other risks and uncertainties to which our business and future financial performance are subject is contained in our Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (“SEC”) on March 15, 2023 (“Form 10-K”), and other documents we file with the SEC from time to time. We urge readers of this news release to review the “Risk Factors” section our Form 10-K and any updates to those risk factors set forth in our subsequent Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and our other filings with the SEC. Also, our actual financial results in the future may differ from those currently expected due to additional risks and uncertainties of which we are not currently aware or which we do not currently view as, but in the future may become, material to our business or operating results. Due to these and other possible uncertainties and risks, readers are cautioned not to place undue reliance on the forward-looking statements contained in this news release, which speak only as of today’s date, or to make predictions based solely on historical financial performance. Any forward-looking statement speaks only as of the date on which it is made, and we do not undertake any obligation to update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law.

    Contacts:
    Financial Profiles, Inc.
    Tony Rossi
    310-622-8221
    MYFW@finprofiles.com
    IR@myfw.com


     
    First Western Financial, Inc.
    Consolidated Financial Summary (unaudited)
     
     Three Months Ended
     December 31, September 30, December 31,
    (Dollars in thousands, except per share amounts) 2023   2023   2022 
    Interest and dividend income:     
    Loans, including fees$35,625  $34,141  $30,349 
    Loans accounted for under the fair value option 257   300   488 
    Investment securities 600   607   645 
    Interest-bearing deposits in other financial institutions 1,350   1,292   931 
    Dividends, restricted stock 161   141   238 
    Total interest and dividend income 37,993   36,481   32,651 
          
    Interest expense:     
    Deposits 19,037   17,467   8,260 
    Other borrowed funds 2,625   2,248   2,403 
    Total interest expense 21,662   19,715   10,663 
    Net interest income 16,331   16,766   21,988 
    Less: provision for credit losses(1) 3,942   329   1,197 
    Net interest income, after provision for credit losses(1) 12,389   16,437   20,791 
          
    Non-interest income:     
    Trust and investment management fees 4,705   4,846   4,358 
    Net gain on mortgage loans 379   654   629 
    Net loss on loans held for sale —   —   (12)
    Bank fees 412   427   812 
    Risk management and insurance fees 544   145   924 
    Income on company-owned life insurance 101   96   88 
    Net loss on loans accounted for under the fair value option (91)  (252)  (602)
    Unrealized loss recognized on equity securities (2)  (19)  — 
    Other 33   202   218 
    Total non-interest income 6,081   6,099   6,415 
    Total income before non-interest expense 18,470   22,536   27,206 
          
    Non-interest expense:     
    Salaries and employee benefits 9,988   10,968   11,679 
    Occupancy and equipment 1,937   1,807   1,910 
    Professional services 1,990   1,867   2,027 
    Technology and information systems 928   906   1,168 
    Data processing 1,189   1,159   1,223 
    Marketing 415   355   500 
    Amortization of other intangible assets 62   62   77 
    Net gain on sale of other real estate owned —   —   (3)
    Other 1,767   1,190   1,324 
    Total non-interest expense 18,276   18,314   19,905 
    Income before income taxes 194   4,222   7,301 
    Income tax (benefit)/expense (61)  1,104   1,830 
    Net income available to common shareholders$255  $3,118  $5,471 
    Earnings per common share:     
    Basic$0.03  $0.33  $0.58 
    Diluted 0.03   0.32   0.56 

    ____________________
    (1)     Provision for credit loss amounts for periods prior to the ASC 326 adoption date of January 1, 2023 are reported in accordance with previously applicable GAAP.


     
    First Western Financial, Inc.
    Consolidated Financial Summary (unaudited)
     
     December 31, September 30, December 31,
    (Dollars in thousands) 2023   2023   2022 
    Assets     
    Cash and cash equivalents:     
    Cash and due from banks$7,284  $6,439  $4,926 
    Interest-bearing deposits in other financial institutions 247,158   265,045   191,586 
    Total cash and cash equivalents 254,442   271,484   196,512 
          
    Held-to-maturity securities, at amortized cost (fair value of $66,617, $66,487 and $74,718, respectively), net of allowance for credit losses 74,102   75,539   81,056 
    Correspondent bank stock, at cost 7,155   11,305   7,110 
    Mortgage loans held for sale, at fair value 7,254   12,105   8,839 
    Loans held for sale, at fair value —   —   1,965 
    Loans (includes $13,726, $15,464, and $23,321 measured at fair value, respectively) 2,539,466   2,530,459   2,469,413 
    Allowance for credit losses(1) (27,931)  (23,175)  (17,183)
    Loans, net 2,511,535   2,507,284   2,452,230 
    Premises and equipment, net 25,256   25,410   25,118 
    Accrued interest receivable 11,428   11,633   10,445 
    Accounts receivable 5,095   5,292   4,873 
    Other receivables 2,457   3,052   1,973 
    Goodwill and other intangible assets, net 31,854   31,916   32,104 
    Deferred tax assets, net 7,339   6,624   6,914 
    Company-owned life insurance 16,530   16,429   16,152 
    Other assets 24,490   24,680   21,457 
    Total assets$2,978,937  $3,002,753  $2,866,748 
          
    Liabilities     
    Deposits:     
    Noninterest-bearing$482,579  $476,308  $583,092 
    Interest-bearing 2,046,460   1,943,688   1,822,137 
    Total deposits 2,529,039   2,419,996   2,405,229 
    Borrowings:     
    Federal Home Loan Bank and Federal Reserve borrowings 125,711   259,930   146,886 
    Subordinated notes 52,340   52,279   52,132 
    Accrued interest payable 3,793   3,203   1,125 
    Other liabilities 21,842   21,089   20,512 
    Total liabilities 2,732,725   2,756,497   2,625,884 
          
    Shareholders’ Equity     
    Total shareholders’ equity 246,212   246,256   240,864 
    Total liabilities and shareholders’ equity$2,978,937  $3,002,753  $2,866,748 

    ____________________
    (1)     Allowance for credit loss amounts for periods prior to the ASC 326 adoption date of January 1, 2023 are reported in accordance with previously applicable GAAP.


     
    First Western Financial, Inc.
    Consolidated Financial Summary (unaudited)
     
     December 31, September 30, December 31,
    (Dollars in thousands) 2023   2023   2022 
    Loan Portfolio     
    Cash, Securities, and Other(1)$140,053  $148,669  $165,670 
    Consumer and Other 23,596   23,975   26,539 
    Construction and Development 347,515   349,436   288,497 
    1-4 Family Residential 933,684   913,085   898,154 
    Non-Owner Occupied CRE 546,966   527,377   496,776 
    Owner Occupied CRE 197,205   208,341   216,056 
    Commercial and Industrial 345,393   349,515   361,028 
    Total 2,534,412   2,520,398   2,452,720 
    Loans accounted for under the fair value option 14,129   16,105   23,415 
    Total loans held for investment 2,548,541   2,536,503   2,476,135 
    Deferred (fees) costs and unamortized premiums/(unaccreted discounts), net(2) (9,075)  (6,044)  (6,722)
    Loans (includes $13,726, $15,464, and $23,321 measured at fair value, respectively)$2,539,466  $2,530,459  $2,469,413 
    Mortgage loans held for sale 7,254   12,105   8,839 
    Loans held for sale —   —   1,965 
          
    Deposit Portfolio     
    Money market deposit accounts$1,386,149  $1,388,726  $1,336,092 
    Time deposits 496,452   373,459   224,090 
    Negotiable order of withdrawal accounts 147,488   164,000   234,778 
    Savings accounts 16,371   17,503   27,177 
    Total interest-bearing deposits 2,046,460   1,943,688   1,822,137 
    Noninterest-bearing accounts 482,579   476,308   583,092 
    Total deposits$2,529,039  $2,419,996  $2,405,229 

    ____________________
    (1) Includes PPP loans of $4.3 million as of December 31, 2023, $4.9 million as of September 30, 2023, and $7.1 million as of December 31, 2022.
    (2) Includes fair value adjustments on loans held for investment accounted for under the fair value option.


     
    First Western Financial, Inc.
    Consolidated Financial Summary (unaudited) (continued)
     
     As of or for the Three Months Ended
     December 31, September 30,  December 31,
    (Dollars in thousands) 2023   2023   2022 
    Average Balance Sheets     
    Assets     
    Interest-earning assets:     
    Interest-bearing deposits in other financial institutions$104,789  $102,510  $103,190 
    Federal funds sold —   —   — 
    Investment securities 76,331   78,057   84,017 
    Correspondent bank stock 7,576   7,162   11,880 
    Loans 2,536,379   2,502,419   2,436,273 
    Interest-earning assets 2,725,075   2,690,148   2,635,360 
    Mortgage loans held for sale 9,915   12,680   9,065 
    Total interest-earning assets, plus mortgage loans held for sale 2,734,990   2,702,828   2,644,425 
    Allowance for credit losses(1) (23,352)  (22,122)  (16,724)
    Noninterest-earning assets 126,122   125,774   125,355 
    Total assets$2,837,760  $2,806,480  $2,753,056 
          
    Liabilities and Shareholders’ Equity     
    Interest-bearing liabilities:     
    Interest-bearing deposits$1,914,856  $1,846,318  $1,582,587 
    FHLB and Federal Reserve borrowings 139,316   125,250   212,693 
    Subordinated notes 52,299   52,242   38,335 
    Total interest-bearing liabilities 2,106,471   2,023,810   1,833,615 
    Noninterest-bearing liabilities:     
    Noninterest-bearing deposits 456,787   512,956   659,076 
    Other liabilities 25,387   24,228   21,660 
    Total noninterest-bearing liabilities 482,174   537,184   680,736 
    Total shareholders’ equity 249,115   245,486   238,705 
    Total liabilities and shareholders’ equity$2,837,760  $2,806,480  $2,753,056 
          
    Yields/Cost of funds (annualized)     
    Interest-bearing deposits in other financial institutions 5.11%  5.00%  3.57%
    Investment securities 3.12   3.09   3.05 
    Correspondent bank stock 8.43   7.81   7.95 
    Loans 5.59   5.43   5.00 
    Mortgage loans held for sale 6.60   6.70   6.39 
    Total interest-earning assets 5.51   5.35   4.90 
    Interest-bearing deposits 3.94   3.75   2.07 
    Cost of deposits 3.18   2.94   1.46 
    FHLB and Federal Reserve borrowings 5.36   4.58   3.58 
    Subordinated notes 5.63   6.08   5.03 
    Total interest-bearing liabilities 4.08   3.86   2.31 
    Net interest margin 2.37   2.46   3.30 
    Net interest rate spread 1.43   1.49   2.59 

    ____________________
    (1)     Allowance for credit loss amounts for periods prior to the ASC 326 adoption date of January 1, 2023 are reported in accordance with previously applicable GAAP.


     
    First Western Financial, Inc.
    Consolidated Financial Summary (unaudited) (continued)
     
     As of or for the Three Months Ended
     December 31, September 30,  December 31,
    (Dollars in thousands, except share and per share amounts) 2023   2023   2022 
    Asset Quality     
    Non-performing loans$59,675  $56,146  $12,349 
    Non-performing assets 59,675   56,146   12,349 
    Net charge-offs 44   190   95 
    Non-performing loans to total loans 2.34%  2.21%  0.50%
    Non-performing assets to total assets 2.00   1.87   0.43 
    Allowance for credit losses to non-performing loans(3)  46.81   41.28   139.14 
    Allowance for credit losses to total loans(3)  1.10   0.92   0.70 
    Allowance for credit losses to adjusted loans(1)(3)  1.10   0.92   0.78 
    Net charge-offs to average loans(2) —   0.01  * 
          
    Assets Under Management$6,752,981  $6,395,786  $6,106,973 
          
    Market Data     
    Book value per share at period end 25.70   25.76   25.37 
    Tangible book value per common share(1)  22.37   22.42   21.99 
    Weighted average outstanding shares, basic 9,572,582   9,553,331   9,493,732 
    Weighted average outstanding shares, diluted 9,739,117   9,743,270   9,702,908 
    Shares outstanding at period end 9,581,183   9,560,209   9,495,440 
          
    Consolidated Capital     
    Tier 1 capital to risk-weighted assets 9.48%  9.32%  9.28%
    CET1 to risk-weighted assets 9.48   9.32   9.28 
    Total capital to risk-weighted assets 12.82   12.45   12.37 
    Tier 1 capital to average assets 7.89   7.96   7.81 
          
    Bank Capital     
    Tier 1 capital to risk-weighted assets 10.62   10.42   10.29 
    CET1 to risk-weighted assets 10.62   10.42   10.29 
    Total capital to risk-weighted assets 11.69   11.31   11.06 
    Tier 1 capital to average assets 8.83   8.88   8.65 

    ____________________
    (1) Represents a Non-GAAP financial measure. See “Reconciliation of Non-GAAP Measures” for a reconciliation of our Non-GAAP measures to the most directly comparable GAAP financial measure.
    (2) Value results in an immaterial amount.
    (3) Allowance for credit loss amounts for periods prior to the ASC 326 adoption date of January 1, 2023 are reported in accordance with previously applicable GAAP. Total loans does not include loans accounted for under the fair value option.


     
    First Western Financial, Inc.
    Consolidated Financial Summary (unaudited) (continued)
     
    Reconciliations of Non-GAAP Financial Measures
     As of or for the Three Months Ended
     December 31, September 30,  December 31,
    (Dollars in thousands, except share and per share amounts) 2023   2023   2022 
    Tangible Common     
    Total shareholders' equity$246,212  $246,256  $240,864 
    Less: goodwill and other intangibles, net 31,854   31,916   32,104 
    Tangible common equity$214,358  $214,340  $208,760 
          
    Common shares outstanding, end of period 9,581,183   9,560,209   9,495,440 
    Tangible common book value per share$22.37  $22.42  $21.99 
    Net income available to common shareholders 255   3,118   5,471 
    Return on tangible common equity (annualized) 0.48%  5.82%  10.48%
          
    Efficiency     
    Non-interest expense$18,276  $18,314  $19,905 
    Less: amortization 62   62   77 
    Less: acquisition related expenses 36   30   195 
    Adjusted non-interest expense$18,178  $18,222  $19,633 
          
    Total income before non-interest expense$18,470  $22,536  $27,206 
    Less: unrealized loss recognized on equity securities (2)  (19)  — 
    Less: net loss on loans accounted for under the fair value option (91)  (252)  (602)
    Less: net loss on loans held for sale at fair value —   —   (12)
    Plus: provision for credit losses(1) 3,942   329   1,197 
    Gross revenue$22,505  $23,136  $29,017 
    Efficiency ratio 80.77%  78.76%  67.66%
          
    Allowance for Credit Loss to Adjusted Loans      
    Total loans held for investment 2,548,541   2,536,503   2,476,135 
    Less: loans acquired(2) —   —   234,717 
    Less: PPP loans(3) 4,343   4,876   6,378 
    Less: loans accounted for under fair value 14,129   16,105   23,415 
    Adjusted loans$2,530,069  $2,515,522  $2,211,625 
          
    Allowance for credit losses(1)$27,931  $23,175  $17,183 
    Allowance for credit losses to adjusted loans(1) 1.10%  0.92%  0.78%

    ___________________
    (1) Provision and allowance for credit loss amounts for periods prior to the ASC 326 adoption date of January 1, 2023 are reported in accordance with previously applicable GAAP.
    (2) As of December 31, 2023 and September 30, 2023, acquired loans totaling $212.3 million and $216.1 million, respectively, are included in the allowance for credit loss calculation and are therefore not removed in calculating adjusted total loans.
    (3) As of December 31, 2023 and September 30, 2023, the adjustment for PPP loans includes acquired PPP loans as acquired loans are included in total loans held for investment as a result of the adoption of ASC 326. As of December 31, 2022, the adjustment for PPP loans did not include acquired PPP loans, as those were already included in the loans acquired adjustment.


     
    First Western Financial, Inc.
    Consolidated Financial Summary (unaudited) (continued)
     
     As of or for the Three Months Ended
     December 31, September 30,  December 31,
    (Dollars in thousands, except share and per share data) 2023   2023   2022 
    Adjusted Net Income Available to Common Shareholders     
    Net income available to common shareholders$255  $3,118  $5,471 
    Plus: acquisition related expenses 36   30   195 
    Less: income tax impact from acquisition related expenses 9   8   49 
    Adjusted net income available to shareholders$282  $3,140  $5,617 
          
    Pre-Tax, Pre-Provision Net Income     
    Income before income taxes$194  $4,222  $7,301 
    Plus: provision for credit losses 3,942   329   1,197 
    Pre-tax, pre-provision net income$4,136  $4,551  $8,498 
          
    Adjusted Basic Earnings Per Share     
    Basic earnings per share$0.03  $0.33  $0.58 
    Plus: acquisition related expenses net of income tax impact*  *   0.01 
    Adjusted basic earnings per share$0.03  $0.33  $0.59 
          
    Adjusted Diluted Earnings Per Share     
    Diluted earnings per share$0.03  $0.32  $0.56 
    Plus: acquisition related expenses net of income tax impact*  *   0.02 
    Adjusted diluted earnings per share$0.03  $0.32  $0.58 
          
    Adjusted Return on Average Assets (annualized)     
    Return on average assets 0.04%  0.44%  0.79%
    Plus: acquisition related expenses net of income tax impact*   0.01   0.03 
    Adjusted return on average assets 0.04%  0.45%  0.82%
          
    Adjusted Return on Average Shareholders' Equity (annualized)     
    Return on average shareholders' equity 0.41%  5.08%  9.17%
    Plus: acquisition related expenses net of income tax impact 0.04   0.04   0.24 
    Adjusted return on average shareholders' equity 0.45%  5.12%  9.41%
          
    Adjusted Return on Tangible Common Equity (annualized)     
    Return on tangible common equity 0.48%  5.82%  10.48%
    Plus: acquisition related expenses net of income tax impact 0.05   0.04   0.28 
    Adjusted return on tangible common equity 0.53%  5.86%  10.76%

    * Represents an immaterial impact to adjusted earnings per share.


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